Any genuinely progressive government would resist pressure to increase our attack capacity and tackle inequality with smarter public spending. There are two scare stories surrounding the budget. The first claims that government spending is out of control and that there is no ‘fiscal headroom’, making cuts inevitable. The second warns that Britain faces military threats requiring a sharp rise in arms spending. Neither claim is objectively definitive.
“Fiscal headroom” is not an objective measurement. The government has rules to balance income and outgoings day-to-day and to reduce public debt by the end of this parliament. The Bank of England’s policy of selling government bonds at below their purchase price has raised interest rates, increasing debt costs. Trailed cuts to services are therefore unnecessary.
There is a broader critique of using budget space to address extreme inequality. The chancellor could, but is not obliged to, use the budget to tackle the country’s stark disparities. In Britain, the top 10% now own over half of the wealth. Between 2011 and 2021 the absolute wealth gap between the richest and poorest 10% widened from £7.5 trillion to £11.5 trillion, a 54% increase. A radical wealth tax has been suggested as a potential source of revenue, with estimates from the Wealth Tax Commission indicating it could raise around £260bn per year.
A further line of argument challenges the claim that taxing the wealthy is ineffective. If implemented, a radical wealth tax could significantly bolster public finances without immediate distress to essential services.